America is experiencing a profound housing shortage, not just here in Eugene and Springfield Oregon.…
If you think you’re ready to buy a house, you’re going to want to check your credit score. And, you should make sure to check it before your lender does. Ensuring that your credit report is free of errors and that it contains mostly positive information makes you a credit-worthy consumer. That makes you a banker’s favorite and gives you the confidence to bid on the home you want at an interest rate you can afford.
Your past credit history tells a story about your willingness and ability to re-pay a loan. The longer and better your credit history, the better your chance is for mortgage approval. Positive information goes a long way for loan consideration. If you have negative items, work to correct them. Depending on the severity and quantity, you may still qualify for a loan, but the better your credit score, the better your loan terms.
Check For Errors
When you check your credit score, look for inaccurate items and contact the creditor to request to correct them. If something is in error, contact the creditor and ask to have it removed. Stay professional and courteous when contacting creditors, both current and former.
Address Major Negative Items
Accounts in active collections and judgements are major negative items in your credit history. If you have either in your history, arrange to pay them as quickly as possible. Judgements can result in wage garnishments and this reflects very poorly against your personal history. Judgements stay on your credit report for seven years. If you’ve had any recent payment issues, plan to pay them before they make it to your credit report.
Credit Card Balances
Check your credit score if you have open credit cards. The bank is going to review your credit utilization ratio as well as your debt-to-income ratio. If you have too many open accounts, they may count both against you if they’re too high. Give your report valuable positive history by paying credit cards off quickly and on time. If you can’t pay your cards off immediately, then be sure to pay them all on time, and always pay more than the minimum payment due.
Avoid Opening New Credit Accounts
During the year that you are working on improving your credit, try to avoid opening new accounts. Credit reporting agencies give you a grace of 30-45 days when they see you’re shopping for a mortgage loan, but hard inquiries, such as mortgages, automobile loans, and lines of credit still show on your credit report. Multiple inquiries during the same time frame can hurt your credit score.
Save Like You Mean It
Save as much as you can, as often as you can. Assure your lender that you’re not going to be financially stressed when paying back your mortgage. Lenders will request your bank statements to confirm where your funds are coming from and how long they’ve been in your possession. They want to see that your accounts are in good standing and that the money in them truly belongs to you, so they will often request two or more months of statements. Lenders also like to see savings when they’re reviewing your application for a mortgage.
The Bottom Line
It’s important to check your credit score before you start shopping for a mortgage. You want to confirm that you’re eligible for good lending terms. Creating good financial habits like paying every bill on time every time will naturally improve your score over time.
Pull your credit report and go over it very carefully. There’s no quick fix to repairing damaged credit, but there are positive actions you can take starting now.